At £500/day (220 days/year), working inside IR35 as a PAYE employee produces approximately £70,157/year take-home. The same day rate outside IR35 through a Limited Company yields approximately £78,420/year — a gap of about £8,263. Following the April 2026 dividend tax rise to 10.75%, the outside advantage has narrowed by roughly £2,000 vs 2025-26.
| Item | Inside IR35 (PAYE) | Outside IR35 (Ltd Co) |
|---|---|---|
| Day rate × 220 days | £110,000 | £110,000 |
| Corporation tax (19%) | — | £18,532 |
| Director salary | £110,000 (PAYE) | £12,570 (tax-free) |
| Income tax paid | ≈ £34,460 | ≈ £0 on salary |
| Dividends + dividend tax | — | ≈ £10,636 |
| Employee NI | ≈ £5,383 | ≈ £0 |
| Annual take-home | ≈ £70,157 | ≈ £78,420 |
| Difference | — | +£8,263/year outside |
Source: HMRC IR35 guidance and HMRC tax rates 2026-27. All figures illustrative. Status determination is fact-specific; seek independent advice.
On a £/day × 220 days (£0/yr): inside IR35 £0/year, outside IR35 (Ltd Co.) £12,570/year — outside IR35 pays £12,570 more in 2026-27.
Annual take-home at 220 days, 5% pension. 2026-27 including 10.75% dividend tax.
| Day Rate | Annual Revenue | Inside IR35 | Outside IR35 (Ltd) | Difference |
|---|---|---|---|---|
| £350/day | £77,000 | £52,907 | £50,969 | £1,939 PAYE |
| £400/day | £88,000 | £58,957 | £56,694 | £2,264 PAYE |
| £500/day | £110,000 | £69,205 | £68,143 | £1,063 PAYE |
| £600/day | £132,000 | £75,616 | £79,592 | +£3,976 Ltd |
| £750/day | £165,000 | £92,199 | £96,766 | +£4,567 Ltd |
Key IR35 questions for contractors in 2026-27.
IR35 status is determined by actual working practices, not by contract or preference. This calculator shows indicative take-home comparisons only — it does not constitute legal or tax advice. Always seek qualified advice from an IR35 specialist or accountant. Dividend tax rates confirmed for the 2026-27 tax year (April 2026 to April 2027).